What happens inside their minds when they are in a depressive episode?

Distorted reality: If you are referring to the "mind" as the milieu of thought and identity that makes up personhood, then with depression every memory and self judgment and expectation of the future is run through a "negative" sieve with all possible negative interpretations having the most weight and attraction of their attention. This of course leads to hopelessness and helplessness in many, anger in others, etc.